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Saturday, July 07, 2007

Is Second Life a libertarian utopia or a politician's wet dream?

Michael Gerson, former speech writer for George Bush, wrote a column for the Washington Post. It’s premise seems to be that we need big government to take care of us since people are sinful and can’t be trusted.

To prove his point Gerson relied upon the fictional world of theon-line game Second Life. He describes this unreal world:

Instead of showing the guiding hand of an author, this universe is created by the choices of its participants, or "residents." They can build, buy, trade and talk in a world entirely without rules or laws; a pure market where choice and consumption are the highest values. Online entrepreneurs make real money selling virtual clothing, cars and "skins" -- the photorealistic faces and bodies of avatars. Companies such as Dell, IBM and Toyota market aggressively within Second Life.

He says this “large-scale experiment in libertarianism” allows resident to “do and be anything they wish. There are no binding forms of community, no responsibilities that aren’t freely chosen and no lasting consequences of human actions.” And the result is that some of the characters act in very bad ways. Here is where Gerson really goes off the tracks and shows his ignorance about the theories he is condemning:

Libertarians hold to a theory of "spontaneous order" -- that society should be the product of uncoordinated human choices instead of human design. Well, Second Life has plenty of spontaneity, and not much genuine order. This experiment suggests that a world that is only a market is not a utopia. It more closely resembles a seedy, derelict carnival -- the triumph of amusement and distraction over meaning and purpose.

It is typical communitarian conservatism, an elitist view of the world. But more importantly it is a false view of the world and a false representation of the ideas he is attacking. He pretends the only thing missing in this on-line world is Big Brother watching people and forcing them to live morally. So when these fictional characters act immorally he then attributes that to what he sees as the fallacy of spontaneous order. One could note this is basically a religios view that says that societies don’t naturally evolve and coordinate themselves but need the touch of a central planner or higher power to coordinate them -- a sort of “intelligent design” theory of the social life.

Spontaneous order does not occur in a world without consequences. Nor would it. In a world where there are only rights to act and no consequences then people will act badly.

Consider the immoral characters in this fictional world and what happens if they act badly. Nothing. If promiscuous there is no reality of pregnancy unless they want it to exist. There are no sexually transmitted diseases and no one dying from AIDS. And if you attack someone in this world, and they kill you in self defense, you just resurrect yourself. All consequences have been abolished.

This is a fictional realm where actions don’t necessarily lead to bad consequences. There is nothing real about that. In the real world if you die you are dead and you don’t resurrect to play again.

In the real world people respond to incentives, for the most part, and consequences create a large number of those incentives. There are negative and positive consequences. In this on-lineworld there is no “pure market” as Gerson falsely insinuates. In markets people have costs as well as benefits not just benefits.

Incentives matter. I can’t say that enough times. A world which removes consequences is a world where people act irresponsibly. I don’t care if you say there are rights and responsibilities or if you say there are actions and consequences. Whatever the label in a normal world the two are linked.

Politicians, like the man Gerson helped elect, are the ones who tend to remove consequences and who tend to believe that incentives don’t matter -- at least they don’t matter in regards to the policies they support.

Politicians are very selective in their belief in incentives. They want to stop immorality so they have “sin taxes” on alcohol or tobacco for instance. They say that raising the price of “immoral” (if you are a Rightist) or “unhealthy” (if you are Leftist) choices reduces the tendency to act in these bad ways. Raise the price of something and you get less. Basic economic incentives.

But those same politicians then turn around and raise the price of labor arguing that there will be no negative consequences to doing so. They argue that if you tax labor you don’t get less labor. But if you tax alcohol you do get less drinking. They will impose taxes on investments and argue that it won’t have a negative impact on investing. But tax tobacco and you get less smoking. They raise the price of building homes and pretend it doesn’t contribute to homelessness. They fantasize that there are only negative consequences to policies they oppose.

The only people who actually try to live in “Second Life” are politicians. They actually do reduce the consequences of bad behavior as much as is humanely possible.

If you go out drinking regularly and become a drunk the state will be there to make sure you have an income. Absent such intervention one consequence of being a drunk is the absence of an income. We have welfare to make sure you can continue to drink and still have an income.

I used to watch this relatively young drunk on the streets of the city where I lived. He hung around in my neighborhood telling people how he needed money for food. Often he would sit outside for a few hours panhandling until he had enough in hand. But he didn’t buy food. He bought either booze or drugs, sometimes both. The food he got for free not far from where he panhandled. The “donations” were so he could drink.

He didn’t have just that income either. I saw a news special on how people used state welfare to buy booze and drugs. Much to my surprise there was this panhandler in line for his “disability” check from the government. His disability was the drinking the state was helping finance. He was interviewed and asked if he had a job. He said he didn’t and said he saw no reason to work if the government gave him money for free. Not everyone who was standing in line would have held the same view. But government is very poor at telling the difference.

Of course there are still consequences to his drinking but a major consequence was ameliorated by state intervention thus making it easier and less costly for him to continue.

Government is constantly acting to separate consequences from actions. And the results are not much different than in Second Life. Consider the S&L debacle in the US. Savings & Loans across the US in the 1980s were suddenly going bust. Of course the Big Brother advocates said it was due to “deregulation”.

What happened was that actions were deregulated but not consequences. Government promised the S&Ls that if they made serious mistakes, and lost money, that the taxpayer would bail them out. So like Second Life the S&Ls had the freedom to act anyway they wanted but didn’t have to bear the consequences. But that was only true of bad consequences. Good consequences, profits, they were allowed to keep.

S&Ls wanted to raise their profits as much as possible. That makes sense. In the real world the riskier the investment the higher the profit. But absent state intervention there are also high potential losses. S&Ls went for higher risk investments because if they panned out they got the extra profits. If they didn’t pan out the government paid the costs. In that scenario the S&Ls maximized their risk to maximize their profits and disaster followed. And the government ponied up. Of the $150 billion that was lost by S&Ls $125 billion of it was covered by the taxpayers thanks to the politicians.

If the S&Ls knew that they would bear the full cost of their investments they would have been far more prudent in their actions. What happened with the S&Ls wasn’t a “pure market” in operation but a fictional market created by politicians.

There are lots of people who believe that much of the time, if not all of the time, people shouldn’t have to bear the brunt of bad decisions. They believe it is compassionate to help people escape the negative effects of bad actions. And I’m not saying anything about that per se as that is a more complicated topic and beyond the scope of this piece. But I am saying that mitigation of consequences, at least partially, imposes the Second Life scenario on the real world.

If we imagine two pure worlds, one where there is no political intervention and one where the state prevents negative consequences it is the second one, not the first, which mimics the world Gerson condemns. Yet Gerson falsely attributes that result to the first world not to the second. Could it be because it is the world he worked to create that actually leads to the consequences he condemns?

Surely Gerson knows this. Maybe he doesn't. In on-line war games if you get killed you just resurrect and start over. Perhaps that inability to understand the difference between fiction and reality explains how the administration he worked for got involved in a war where they imagined little or no negative consequences.